Packaged foods company ConAgra Foods, Inc. (CAG) on Tuesday reported a 63% year-over-year plunge in profit for the first quarter, as the year-ago quarter profit included a gain from the sale of the company's trading & merchandising operations. However, excluding items, earnings per share from continuing operations for the quarter surged 41%, and topped analysts' expectations by four cents. The company also raised its earnings forecast for the full year 2010.
ConAgra Foods, the maker of Chef Boyardee pasta, Hunt's ketchup and Peter Pan peanut butter, like its peers, is benefiting from the eat-at-home trend imposed by the tough economy. Moreover, the reduction in ingredient costs also reflects on the bottom-line of the company.
In a statement, chief executive officer, Gary Rodkin said, "We are off to a strong start in fiscal 2010. The Consumer Foods segment posted significantly improved operating profits, along with good sales trends across the consumer branded portfolio, and we expect the balance of the year to show strong profits for this segment due to manageable inflation, good cost savings, sales growth, and favorable mix."
"Our Commercial Foods segment is poised for a solid profit performance in line with our expectations, and we are confident we will deliver our raised EPS guidance for this fiscal year," Rodkin added.
First-Quarter Results
The Omaha, Nebraska-based company reported net income of $165.9 million or $0.37 per share for the first quarter, sharply lower than $442.4 million or $0.94 per share in the prior-year quarter.
The year-ago quarter's results included income from discontinued operations of $0.71 per share, reflecting the gain from the June 2008 divestiture of the Trading & Merchandising operations.
Income from continuing operations increased to $166.5 million or $0.37 per share from $107.6 million or $0.23 per share in the comparable quarter a year ago.
The results for the latest quarter include $0.01 per share of net expense, while the year-ago quarter's results included $0.02 per share of net expense from items impacting comparability.
Excluding items impacting comparability, earnings from continuing operations for the quarter rose to $0.38 per share from $0.27 per share in the year-ago quarter. On average, eleven analysts polled by Thomson Reuters expected the company to report earnings of $0.34 per share for the first quarter. Analysts' estimates typically exclude special items.
Net sales for the quarter decreased 3.1% to $2.96 billion from $3.06 billion in the same quarter last year, and missed eight Wall Street analysts' consensus estimate of $3.09 billion.
Peer Performance
Among ConAgra's peers, Pittsburgh, Pennsylvania-based H.J. Heinz Co. (HNZ) reported in August a 7.2% decline in first-quarter profit to $212.56 million or $0.67 per share, hurt by a stronger U.S. dollar that cut into revenue from overseas markets. Quarterly sales declined to $2.47 billion from $2.58 billion in the year-ago quarter.
Another peer, Northfield, Illinois-based Kraft Foods, Inc. (KFT) posted in August an 11% growth in second-quarter profit to $827 million or $0.56 per share, driven by solid performance across all geographies, improved product mix and lower costs due to the completion of the 2004-2008 restructuring program. However, quarterly net revenues declined 5.9% to $10.2 billion from $10.8 billion in the same quarter last year. Organic net revenues grew by 2.9%, driven by pricing and volume/mix.
Segmental Results
ConAgra operates in two segments - consumer foods and commercial foods. The consumer foods segment includes branded and private label food products sold in various retail and foodservice channels, while the commercial foods segment includes specialty potato, dehydrated vegetable, seasonings, blends, flavors, and milled grain products sold principally to foodservice, food manufacturing, and industrial customers worldwide.
During the quarter, the company transferred the Alexia frozen operations from the consumer foods segment to the commercial foods segment.
Consumer foods sales for the first quarter edged up 0.6% to $1.86 billion, which is 63% of total sales, from $1.85 billion in the prior-year quarter, including about 2% negative impact from lower sales of Slim Jim products due to a plant accident, and unfavorable foreign exchange rates impact of about 1%. Operating profit for the segment surged 34.1% to $249.9 million from $186.3 million in the same quarter last year. Adjust operating profit surged 43% from last year.
Sales for commercial foods declined 8.8% to $1.10 billion, which is 37% of total sales, from $1.21 billion in the year-ago quarter, reflecting lower flour prices due to lower underlying wheat costs at ConAgra Mills. However, operating profit grew 5.2% to $140.8 million from $133.9 million a year ago.
Total segment operating profit increased 22.0% to $390.7 million from $320.2 million in the same quarter last year.
Outlook
For fiscal 2010, reflecting the strong performance of the Consumer Foods segment in the first quarter, ConAgra Foods raised its forecast for earnings from continuing operations, excluding items impacting comparability, to nearly $1.70 per share from the prior outlook in the range of $1.63 to $1.66 per share. Analysts expect the company to report earnings of $1.66 per share for fiscal 2010.
The company also expects full-year fiscal 2010 operating profit for the commercial foods segment to be in line with that reported in fiscal 2009.
Stock Quote
In Tuesday's regular trading session, CAG is currently trading at $21.91, down $0.42 or 1.88% on a volume of 0.77 million shares. In the past 52-week period, the stock has been trading in a range of $13.52 to $22.73.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.